(Zero Hedge)—Today, the S&P 500’s cyclically adjusted price-to-earnings ratio (CAPE) is nearing historic highs, signaling market valuations may be in overheated territory.
In December 2024, the S&P 500 CAPE ratio stood at 37.9 – well above its long-term average of 17.6. Notably, it has only exceeded this level during the Dot-Com bubble and in 2021.
As Visual Capitalist’s Dorothy Neufeld shows in this graphic from Picton Mahoney Asset Management shows the S&P 500 CAPE ratio since 1920.
The S&P 500 CAPE Ratio Across Major Bubbles
The CAPE ratio is a widely used metric for assessing stock market valuations, comparing equity prices to their 10-year average earnings.
By smoothing out short-term fluctuations, it accounts for economic cycles and offers a more stable view of long-term value. Higher CAPE levels often signal stretched valuations, with historical trends showing that ratios above 22 typically indicate heightened market optimism.
Here are the peak CAPE ratios during major market bubbles over the past century:
The CAPE ratio hit an all-time high during the Dot-Com bubble in 1999, which was followed by a 40% decline in the S&P 500 from 2000 to 2002.
More recently, the ratio climbed to 38.6 in 2021, its second-highest reading ever, fueled by massive pandemic stimulus and a big tech rally. The following year, the S&P 500 sank 19.4% as the Federal Reserve kicked off its monetary tightening cycle.
Similarly, the CAPE ratio has risen sharply as AI enthusiasm—particularly for Magnificent Seven stocks—has led stock prices to soar, making stock prices expensive by historical standards.
Diversification Strategies for Market Bubbles
At a time of outsized investor expectations, a more balanced portfolio allocation may reduce exposure to market bubble risk.
Investors and advisors can implement Picton Mahoney Asset Management’s Innovative Portfolio, which offers a strategic 40/30/30 mix of equities, bonds, and alternatives to hedge against a potential asset bubble.
Independent Journalism Is Dying
Ever since President Trump’s miraculous victory, we’ve heard an incessant drumbeat about how legacy media is dying. This is true. The people have awakened to the reality that they’re being lied to by the self-proclaimed “Arbiters of Truth” for the sake of political expediency, corporate self-protection, and globalist ambitions.
But even as independent journalism rises to fill the void left by legacy media, there is still a huge challenge. Those at the top of independent media like Joe Rogan, Dan Bongino, and Tucker Carlson are thriving and rightly so. They have earned their audience and the financial rewards that come from it. They’ve taken risks and worked hard to get to where they are.
For “the rest of us,” legacy media and their proxies are making it exceptionally difficult to survive, let alone thrive. They still have a stranglehold over the “fact checkers” who have a dramatic impact on readership and viewership. YouTube, Facebook, and Google still stifle us. The freer speech platforms like Rumble and 𝕏 can only reward so many of their popular content creators. For independent journalists on the outside looking in, our only recourse is to rely on affiliates and sponsors.
But even as it seems nearly impossible to make a living, there are blessings that should not be disregarded. By highlighting strong sponsors who share our America First worldview, we have been able to make lifelong connections and even a bit of revenue to help us along. This is why we enjoy symbiotic relationships with companies like MyPillow, Jase Medical, and Promised Grounds. We help them with our recommendations and they reward us with money when our audience buys from them.
The same can be said about our preparedness sponsor, Prepper All-Naturals. Their long-term storage beef has a 25-year shelf life and is made with one ingredient: All-American Beef.
Even our faith-driven precious metals sponsor helps us tremendously while also helping Americans protect their life’s savings. We are blessed to work with them.
Independent media is the future. In many ways, that future is already here. While the phrase, “the more the merrier,” does not apply to this business because there are still some bad actors in the independent media field, there are many great ones that do not get nearly enough attention. We hope to change that one content creator at a time.
Thank you and God Bless,
JD Rucker
